U.S.
      SECURITIES AND EXCHANGE COMMISSION


Washington,
      D.C. 20549





Form
      10-Q





(Mark
      One)





|
                X
                |
            QUARTERLY
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934







For
      the
      quarterly period ended: May 31, 2006







|__|
            TRANSITION
                REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
                1934








Commission
      file number: *000-27225*







BDC Capital,
      Inc.


(Name
      of
      small business issuer in its charter)





Minnesota
            41-1427445(State
                or other jurisdiction of incorporation or organization)
            (I.R.S.
                Employer Identification No.)11974
                Portland Avenue, Burnsville, Minnesota
            55337(Address
                of principal executive offices)
            (Zip
                Code)





Registrant's
      telephone number: (952)
      890-2362





Securities
      registered under Section 12(g) of the Exchange Act:





Title
      of Each Class


Common
      Stock


Par
      Value
      $0.01 per share





Indicate
      by check mark if the registrant is a well-known seasoned issuer, as defined
      in
      Rule 405 of the Securities Act.


[
 ]
      Yes  [X]
      No





Indicate
      by check mark if the registrant is not required to file reports pursuant to
      Section 13 or 15(d) of the Act.


[
 ]
        Yes  [X]
        No


Check
      whether the issuer (1) has filed all reports required to be filed by Section
      13
      or 15(d) of the Exchange Act during the past 12 months (or for such shorter
      period that the registrant was required to file such reports), and (2) has
      been
      subject to such filing requirements for the past 90 days.


[X]
      Yes [ 
]
      No













Check
      if
      there is no disclosure of delinquent filers in response to Item 405 of
      Regulation S-B contained in this form, and no disclosure will be contained,
      to
      the best of registrant's knowledge, in definitive proxy or information
      statements incorporated by reference in Part III of this Form 10-K or any
      amendment to this Form 10-K. |__|





Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, or a non-accelerated filer. See definitions of “accelerated
      filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (check
      one):





Large
                Accelerated Filer [  ]
            Accelerated
                Filer [  ]
            Non-Accelerated
                Filer [X]





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Act). [  ] Yes   [X]
      No





State
      the
      aggregate market value of the voting stock held by non-affiliates computed
      by
      reference to the price at which the stock was sold, or the average bid and
      asked
      prices of such stock, as of a specified date within the past 60 days:
      $12,827,164 based on shares held by non-affiliates as of April 28, 2006, and
      the
      closing sale price for said shares in the NASDAQ National Market as of such
      date.





There
      were 427,572,138 shares of the registrant’s common stock outstanding as of July
      10, 2006.





Title
      of Each Class


Preferred
      Stock, Par Value $0.01 per share




The
      Series A Preferred Stock (Series A Preferred) is non-interest bearing, does
      not
      have voting rights and is not entitled to receive dividends. Each share of
      Series A Preferred issued can be converted into common stock on a 1:1 basis
      after a twelve month period. Should a liquidation event occur, the Series A
      Preferred automatically converts into common stock based on the foregoing
      formula. Further, the Series A Preferred is not affected by forward or reverse
      splits on the Corporation's common stock or other adjustments to the
      Corporation's capital structure. Finally, Series A Preferred is entitled to
      elect a majority of the Corporation's board of directors at all times, provided
      that a majority of the board of directors is, at all times, independent.





The
      Corporation has currently 20,000,000 Series A Preferred issued and outstanding
      as of July 10, 2006.






























ii

















TABLE
      OF
      CONTENTS







PART
                IItem
                1.
            Financial
                Statements
            1-9Item
                2.
            Management’s
                Discussion and Analysis and Plan of Operation
            10Item
                3.
            Quantitative
                and Qualitative Disclosures About Market Risk
            11Item4.
            Controls
                and Procedures
            12PART
                IIItem
                1.
            Legal
                Proceedings
            13Item
                1A
            Risk
                Factors
            13Item
                2.
            Unregistered
                sales of Equity Securities and Use of Proceeds
            13Item
                3.
            Defaults
                Upon Senior Securities
            13Item
                4.
            Submission
                of Matters to a Vote of Security Holders
            13Item
                5.
            Other
                Information
            13Item
                6.
            Exhibits
                and Reports on Form 8-K
            13
















iii
















**PART
      I**





ITEM
      1.  FINANCIAL STATEMENTS





PageFinancial
                StatementsBalance
                Sheets
            1Statements
                of Operations
            2Statements
                of Cash Flows
            3Notes
                to Financial Statements
            4-9











































iv









BDC
      Capital, Inc.





BALANCE
      SHEETS


May
      31,
      2006 and February 28, 2006





**ASSETS**May
                31,
            
            February
                28,2006
            
            2006Current
                assets:Cash
            
            $
            120,568
            
            $
            15,346Prepaid
                expense
            
            
            1,260
            
            
            2,019Total
                current assets
            
            
            121,828
            
            
            17,365Property
                and equipment, net
            
            
            -
            
            
            -Investment
                in securities, at fair value (cost of $623,303 and $406,303 at May
                31,
                2006 and February 28, 2006, respectively)
            
            
            1,230,900
            
            
            1,013,900Total
                assets
            
            $
            1,352,728
            
            $
            1,031,265**LIABILITIES
                AND STOCKHOLDERS' EQUITY**Current
                liabilities:Accounts
                payable
            
            $
            16,868
            
            $
            4,420Advance
                from stockholder
            
            
            6,000
            
            
            798Accrued
                liabilities
            
            
            5,276
            
            
            3,876Due
                to BDC Partners, Inc.
            
            
            410
            
            
            410Total
                current liabilities
            
            
            28,554
            
            
            9,504Notes
                payable - stockholder
            
            
            70,000
            
            
            70,000Total
                liabilities
            
            
            98,554
            
            
            79,504Commitments
                and contingenciesStockholders’
                equity:Preferred
                stock, $.01 par value, 20,000,000 shares authorized, 20,000,000 issued
                and
                outstanding
            
            
            200,000
            
            
            200,000Common
                stock, $.01 par value, 2,000,000,000 shares authorized, 427,572,138
                shares
                issued and outstanding
            
            
            4,275,721
            
            
            4,275,721Additional
                paid-in-capital
            
            
            5,129,389
            
            
            5,149,389Subscription
                receivable
            
            
            (3,148,937
            )
            
            (3,550,000
            )Accumulated
                deficit
            
            
            (5,201,999
            )
            
            (5,123,349
            )Total
                stockholders’ equity
            
            
            1,254,174
            
            
            951,761Total
                liabilities and stockholders’ equity
            
            $
            1,352,728
            
            $
            1,031,265







The
      accompanying notes are an integral part of these financial
      statements.






Page
            1






BDC
      Capital, Inc.





STATEMENTS
      OF OPERATIONS





Three
                months
              ended
              May
                31, 2006
            
            Three
                Months
              Ended
              May
                31, 2005Investment
                income
            
            $
            2
            
            $
            804Operating
                Expenses:Professional
                fees
            
            
            26,775
            
            
            33,235Administrative
                expenses
            
            
            47,019
            
            
            15,885Rent
            
            
            1,125
            
            
            1,125Other
            
            
            2,333
            
            
            1,637Interest
                expense
            
            
            1,400
            
            
            284,189Total
                Operating expenses
            
            
            78,652
            
            
            336,071Net
                investment loss
            
            
            (78,650
            )
            
            (335,267
            )Net
                change in unrealized appreciation on investment
            
            
            -
            
            
            -Net
                decrease in net assets resulting from operations
            
            $
            (78,650
            )
            $
            (335,267
            )Loss
                per common share - basic and diluted
            
            $
            (0.00
            )
            $
            (0.02
            )Weighted
                average shares outstanding - basic and diluted
            
            
            427,572,138
            
            
            16,939,870




















The
      accompanying notes are an integral part of these financial
      statements.





Page
            2





**BDC
      Capital, Inc.**





**STATEMENTS
      OF CASH FLOWS**





**Three
                months**
              **ended**
            
            **Three
                months**
              **ended****May
                31, 2006**
            
            **May
                31, 2005**CASH
                FLOWS FROM OPERATING ACTIVITIES:Net
                decrease in net assets resulting from operations as a business development
                company
            
            $
            (78,650
            )
            $
            (335,267
            )Adjustments
                to reconcile net assets resulting from operations and net loss to
                net cash
                used by operating activities:Amortization
                of original issue discount
            
            
            -
            
            
            272,270Changes
                in operating assets and liabilities:Prepaid
                expenses
            
            
            759
            
            
            (3,000
            )Accounts
                payable
            
            
            12,448
            
            
            17,649Accrued
                liabilities
            
            
            1,400
            
            
            4,954Investment
                in BDC Partners, Inc.
            
            
            (217,000
            )
            
            (275,900
            )Due
                to BDC Partners, Inc.
            
            
            -
            
            
            (2,100
            )Net
                cash used in operating activities
            
            
            (281,043
            )
            
            (321,394
            )CASH
                FLOWS FROM FINANCING ACTIVITIES:Net
                advance from stockholder
            
            
            5,202
            
            
            -Payments
                received on stockholder subscription receivable net of $20,000 in
                transaction costs
            
            
            381,063
            
            
            -Payments
                on convertible debt
            
            
            -
            
            
            (161,988
            )Proceeds
                from issuance of common stock
            
            
            -
            
            
            58,560Proceeds
                from issuance of convertible debentures
            
            
            -
            
            
            250,000Net
                cash provided by financing activities
            
            
            386,265
            
            
            146,572Net
                change in cash and cash equivalents for the period
            
            
            105,222
            
            
            (174,822
            )Cash
                and cash equivalents at beginning of period
            
            
            15,346
            
            
            260,179Cash
                and cash equivalents at end of period
            
            $
            120,568
            
            $
            85,357SUPPLEMENTAL
                DISCLOSURES OF CASH FLOW INFORMATION:Cash
                payments for interest
            
            $
            -
            
            $
            6,965SUPPLEMENTAL
                SCHEDULE OF NONCASH INVESTING AND FINANCING
                ACTIVITIES:Debt
                to equity conversion, including accrued interest
            
            $
            -
            
            $
            113,865









The
      accompanying notes are an integral part of these financial
      statements.











Page
            3





**BDC
      Capital, Inc.**





**SCHEDULE
      OF INVESTMENTS**


**May
      31, 2006**











**Portfolio
                Company**
            **Principal
                business**
            **Investments**
            **Cost**
            **Fair
                Value**BDC
                Partners, Inc.
            Technology
            Equity
            $623,303
            $1,230,900







BDC
      Partners, Inc is a private company founded in 2004 and is located in
      Minneapolis, MN. It is a wholly own subsidiary of BDC Capital, Inc. that has
      a
      unique, multidisciplinary technology process paired with an intellectual
      property revenue-focused business model.










































































Page
            4











**Note
      1. Nature of Business and Summary of Significant Accounting
      Policies** :





*Nature
      of business*





BDC
      Capital, Inc. (“The Company”) was formed as a Minnesota corporation on April 7,
      1982. It was incorporated under the name Command Small Computer Learning Center,
      Inc., a computer training company. In 1987, the Company changed its name to
      Command Electronics, Inc. In February 1995, the Company acquired CyberStar
      Computer Systems, a manufacturer and marketer of microcomputers and servers,
      and
      in 1997 it changed its name to CyberStar Computer Corporation. In 2000, the
      Company changed its name to eNetpc, Inc. In November 2004, the Company changed
      its name to BDC Capital, Inc. BDC Capital, Inc. has engaged in the sale of
      computer components, development of software and resell of major computer
      brands. The names "BDC Capital, Inc." "we", "our" and "us" used in this report
      refer to BDC Capital, Inc.




On
      December 10, 2004, the Company elected to be regulated as a business development
      company (BDC) as outlined in the Investment Company Act of 1940 by filing a
      Form
      NT-54A. As a BDC, the Company plans to focus on current opportunities available
      to this attractive business model in these somewhat uncertain economic times.




*Investment
      Strategy*





BDC
      Capital, Inc. intends to build an investment portfolio consisting of revenue
      generating assets and emerging companies well positioned for future growth.
      A
      BDC is a unique kind of investment company that primarily focuses on investing
      in or lending to small private companies and making managerial assistance
      available to them. A BDC may use capital provided by public stockholders and
      from other sources to invest in growing small businesses.





A
      BDC
      provides stockholders the ability to retain the liquidity of a publicly traded
      stock while sharing in the possible benefits of investing in privately owned
      small and medium-sized companies.




As
      a BDC,
      the Company is required to have at least 70% of its assets in portfolio
      companies.





*Use
      of estimates*





The
      preparation of financial statements in conformity with accounting principles
      generally accepted in the United States of America requires management to make
      estimates and assumptions that affect the reported amounts of assets and
      liabilities and disclosure of contingent assets and liabilities at the date
      of
      the financial statements and revenues and expenses during the reporting period.
      Actual results could differ from those estimates.





*Cash
      and cash equivalents*





The
      Company considers all highly liquid investments with original maturity of three
      months or less when purchased to be cash equivalents.







Page
            5








*Valuation
      of Investments*





Value,
      as
      defined in Section 2(a)(41) of 1940 Act, is (i) the market price for those
      securities for which a market quotation is readily available and (ii) for all
      other securities and assets, fair value is as determined in good faith by the
      board of directors. Since there is typically no readily available market value
      for the Company’s privately held investments, the Company values substantially
      all of its investments at fair value as determined in good faith by the board
      of
      directors pursuant to a valuation policy and a consistent valuation process.
      At
      May 31, 2006, approximately 91% of the Company’s total assets represented
      investments of which approximately 100% are valued at fair value. Because of
      the
      inherent uncertainty of determining the fair value of investments that do not
      have a readily available market value, the fair value of the Company’s
      investments determined in good faith by the board of directors may differ
      significantly from the values that would have been used had a ready market
      existed for the investments, and the differences could be material.




There
      is
      no single standard for determining fair value in good faith. As a result,
      determining fair value requires that judgment be applied to the specific facts
      and circumstances of each portfolio investment. The Company must determine
      the
      fair value of each individual investment on a quarterly basis. The Company
      records unrealized depreciation on investments when it believes that an
      investment has decreased in value, including where collection of a loan or
      realization of an equity security is doubtful. Conversely, the Company records
      unrealized appreciation if it believes that the underlying portfolio company
      has
      appreciated in value and, therefore, the Company’s investment has also
      appreciated in value, where appropriate.




As
      a BDC,
      the Company invests primarily in illiquid securities including debt and equity
      securities of private companies. The Company’s investments are generally subject
      to some restrictions on resale and generally have no established trading market.
      Because of the type of investments that the Company makes and the nature of
      its
      business, the Company’s valuation process requires an analysis of various
      factors. The Company’s fair value methodology includes the examination of, among
      other things, the underlying portfolio company performance, financial condition
      and market changing events that impact valuation.





With
      respect to private debt and equity securities, each investment is valued using
      industry valuation benchmarks, and, where appropriate, the value is assigned
      a
      discount reflecting the illiquid nature of the investment and/or the Company’s
      minority, non-control position. When an external event such as a purchase
      transaction, public offering, or subsequent equity sale occurs, the pricing
      indicated by the external event will be used to corroborate the Company’s
      private debt or equity valuation.





*Investments
      in equity securities*





Under
      BDC
      accounting, all equity investments are carried at fair value with any
      adjustments recorded in the statement of operations, combined with adjustments
      in the fair value of investments in loans, as investment gains
      (losses)—unrealized.





In
      accordance with Article 6 of Regulation S-X under the Securities Act of 1933
      and
      Securities Exchange Act of 1934, the Company does not consolidate portfolio
      company investments, including those in which it has a controlling interest.







Page
            6






*Long-Lived
      Assets*





Long-lived
      assets, such as property and equipment are reviewed for impairment whenever
      changes in circumstances indicate that the carrying amount of an asset may
      not
      be recoverable. Recoverability of assets to be held and used is measured by
      comparison of the carrying amount of an asset to estimated undiscounted future
      cash flows expected to be generated by the asset. If the carrying amount of
      an
      asset exceeds its estimated future cash flows, an impairment charge is
      recognized in the amount by which the carrying amount of the asset exceeds
      the
      fair value of the asset.





*Income
      taxes*





Deferred
      taxes are provided on a liability method whereby deferred tax assets are
      recognized for deductible temporary differences and operating losses and tax
      credit carryforwards and deferred tax liabilities are recognized for taxable
      temporary differences. Temporary differences are the differences between the
      reported amounts of assets and liabilities and their tax basis. Deferred tax
      assets are reduced by a valuation allowance when, in the opinion of management,
      it is more likely than not that some portion or all of the deferred tax assets
      will not be realized. Deferred tax assets and liabilities are adjusted for
      the
      effects of changes in tax laws and rates on the date of the
      enactment.




*Stock-based
      compensation*





Prior
      to
      March 1, 2006, the Company accounted for stock based compensation in accordance
      with Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to
      Employees.” Effective March 1, 2006, the Company adopted the Financial
      Accounting Standards Board Statement of Financial Accounting Standards No.
      123
      (revised 2004), “Share-Based Payment,” (“SFAS No.123R”) using the modified
      prospective method. The adoption of SFAS No. 123R did not impact the Company’s
      operating expenses before investment gains and losses, net investment loss,
      cash
      flows from operations, cash flows from financing activities, or basic and
      diluted earnings per share during the three months ended May 31, 2006. During
      the quarter ended May 31, 2006, the Company recognized no compensation expense
      related to share-based awards. The Company issued no options during the three
      months ended May 31, 2006 and all previously issued option grants were fully
      vested as of February 29, 2004.





At
      May
      31, 2006 and February 28, 2006 there were 422,200 options outstanding for which
      forfeiture restrictions have not lapsed.





For
      periods prior to March 1, 2006, if compensation expense had been determined
      consistent with the method in SFAS No. 123, on a pro forma basis, BDC’s net
      investment loss and basic and diluted earnings per share would have been
      unchanged for the three months ended May 31, 2005.





*Net
      loss per share*





Basic
      loss per share is computed using the weighted average number of shares
      outstanding for the period. Diluted loss per share is computed using the
      weighted average number of shares outstanding per share adjusted for the
      incremental shares attributed to outstanding stock options under the Company's
      stock option plans, convertible debt and convertible preferred stock.
      Incremental shares attributable to the assumed exercise of stock options and
      conversion of debt and preferred stock for the three months ended May 31, 2006
      and 2005 were excluded from the computation of diluted loss per share as their
      effect would be anti-dilutive.








Page
            7






*Recently
      issued accounting pronouncements*




In
      May
      2005, the FASB issued SFAS 154, "Accounting Changes and Error Corrections"
      which
      replaces APB Opinion No. 20 "Accounting Changes" and SFAS No. 3, "Reporting
      Accounting Changes in Interim Financial Statements-An Amendment of APB Opinion
      No. 28." SFAS 154 provides guidance on the accounting for and reporting of
      accounting changes and error corrections. It establishes retrospective
      application, or the latest practicable date, as the required method for
      reporting a change in accounting principle and the reporting of a correction
      of
      an error. SFAS 154 is effective for accounting changes and corrections of errors
      made in fiscal years beginning after December 15, 2005. Adoption of SFAS 154
      did
      not have an impact on our results of operations and financial condition.




**Note
      2. Property and Equipment**





Property
      and equipment are as follows at May 31:


**2006**
            
            **2005**Office
                equipment and furniture
            
            $
            469,666
            )
            
            469,666Less
                accumulated depreciation
            
            
            (455,028
            )
            
            (455,028
            )Less
                impairment of equipment
            
            
            (14,638
            )
            
            (14,638
            )$
            
            
            $





Depreciation
      expense was $0 for the three months ended May 31, 2006 and 2005.





**Note
      3. Debt Financing**




The
      Company has entered into binding term sheets that provide for convertible debt
      financing bearing interest at 8.0% payable at maturity and convertible at 50%
      of
      the Company’s common stock fair value totaling $16.5 million. The Company, at
      its option may draw up to $50,000 weekly against the total investor commitment
      over a 24 month period beginning February 28, 2005, subject to certain
      restrictions. As of May 31, 2006, no draws have been made against this
      commitment.





**Note
      4. Notes payable - stockholder**





As
      of May
      31, 2006, the Company had advances from a stockholder in the amount of $70,000.
      The unsecured notes are due at various dates from June 21, 2007 to August 1,
      2007 with an interest rate of 8%. Accrued interest at May 31, 2006 totaled
      $5,276.





**Note
      5. Related Party Transactions**





The
      Company sub-leases from a director of the Company approximately 1,000 square
      feet of space used for offices and operations equipment storage at 11974
      Portland Avenue, Burnsville, Minnesota at a monthly rent of $750 renewable
      monthly which is split equally between BDC Capital, Inc. and BDC Partners,
      Inc.
      The Company’s lease payments made to the director for the three months ended May
      31, 2006 and 2005 was $1,125, respectively.





**Note
      6. Commitments and Contingencies**





The
      Company is exposed to asserted and unasserted claims encountered in the normal
      course of business. In the opinion of management, the resolution of these
      matters will not have a material adverse effect on the Company's financial
      position or results of operations.








Page
            8






**Note
      7. Financial Highlights** ***-
      as a business development company:***





Following
      is a schedule of financial highlights for the three months ended May 31, 2006
      and 2005:





**2006**
            
            **2005**Per
                Share Data:Net
                asset value, beginning of period
            
            $
            0.00
            
            $
            .12Income
                from investment operations:Net
                investment loss
            
            
            0.00
            
            
            (0.02
            )Net
                realized gains on investments
            
            
            -
            
            
            -Net
                unrealized appreciation on investments
            
            
            -
            
            
            -Net
                increase (decrease) in net assets resulting from
                operations
            
            
            0.00
            
            
            (0.02
            )Dividends
            
            
            -
            
            
            -Issuance
                of shares (common and preferred)
            
            
            -
            
            
            0.06Dilutive
                effect of share insurances
            
            
            -
            
            
            (0.12
            )Increase
                in stockholders' equity (deficit) from OID on convertible
                debentures
            
            
            -
            
            
            0.01Increase
                (decrease) in stockholder's equity relating to equity
                issuances
            
            
            -
            
            
            (0.05
            )Net
                asset value, end of period (a)
            
            $
            0.00
            
            $
            0.05Per
                share market value at end of period
            
            
            0.03
            
            
            0.16Total
                Return
            
            
            50
            %
            
            700
            %Common
                shares outstanding at end of period, May 31, 2006 and 2005
            
            
            427,572,138
            
            
            17,722,582Ratio/Supplemental
                Data:Net
                assets end of period
            
            $
            1,254,174
            
            $
            895,194Ratio
                of operating expenses to average net assets (annualized)
            
            
            29
            %
            
            157
            %Ratio
                of net investment loss to average assets (annualized)
            
            
            29
            %
            
            157
            %








(a)
      Based
      on total shares outstanding.





Page
            9







ITEM
      2.  MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN OF OPERATION





The
      following is a discussion of the financial condition and results of operations
      of the Company for the three months ended May 31, 2006 and 2005, which should
      be
      read in conjunction with, and is qualified in its entirety by, the financial
      statements and notes thereto included elsewhere in this report.





RESULTS
      OF OPERATIONS





THREE
      MONTHS ENDED MAY 31, 2006 AND MAY 31, 2005





For
      the
      three months ended May 31, 2006, the Company incurred an investment loss of
      $78,650. The main components of this loss related to $47,019 of administrative
      fees with a majority of these fees relating to the management of the Company
      and
      $26,775 of professional fees primarily related to audit fees.





For
      the
      three months ended May 31, 2005, the Company incurred an investment loss of
      $335,267. The main components of this loss related to $33,235 of professional
      fees with a majority of these fees relate to setting up the Company as a
      business development company and $284,189 for interest expense on convertible
      debt. On the interest expense, $272,270 relates to the amortization of original
      debt discount which originated from the beneficial conversion feature related
      to
      the debt.





LIQUIDITY
      AND CAPITAL RESOURCES





***As
      a business development company***





BDC
      Capital, Inc.’s cash position at May 31, 2006 was $120,568, an increase of
      $105,222 from $15,346 at February 28, 2006. During the three months ended May
      31, 2006, net cash used in operating activities was $281,043 of which $217,000
      was an additional investment into BDC Partners, Inc. Net cash provided by
      financing activities of $386,265 for the three months ended May 31, 2006
      consisted primarily of payments received on stockholder subscriptions receivable
      during the three month period.





BDC
      Capital, Inc.’s cash position at May 31, 2005 was $85,357. During the three
      months ended May 31, 2005, net cash used in operating activities was $321,394
      of
      which $275,900 was an additional investment into BDC Partners, Inc. Net cash
      provided by financing activities of $146,572 for the three months ended May
      31,
      2005 consisted of issuance of convertible debentures and common stock during
      the
      three month period.





Our
      current monthly operating expenses are approximately $25,000 per month. We
      anticipate that any additional financing would be through the collection of
      subscriptions receivable, sales of our common stock or other equity-based
      securities. We do have in place a $16.5 million equity line commitment from
      new
      and existing investors. BDC Capital, Inc. signed agreements for the equity
      line
      in February 2005. Under the terms of the agreement, BDC Capital may elect to
      receive as much as $16.5 million from the investors in common stock purchases
      over the next two years.





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            10








**Recent
      Developments — Portfolio Companies**





During
      the quarter ended May 31, 2006, BDC Capital, Inc. invested $217,000 equity
      in
      BDC Partners, Inc bringing the total investment in BDC Partners, Inc. to
      $623,303 as of May 31, 2006. The additional investment was funded by proceeds
      received from the stock subscription receivable.





**Critical
      Accounting Policies**





Critical
      accounting policies are those that are both important to the presentation of
      our
      financial condition and results of operations and those that require
      management’s most difficult, complex or subjective judgments. Our critical
      accounting policies are those applicable to the valuation of investments.





Valuation
      of Portfolio Investments





As
      a
      business development company, we invest primarily in illiquid securities
      including debt and equity securities of private companies. The investments
      are
      generally subject to restrictions on resale and generally have no established
      trading market. We value substantially all of our equity investments at fair
      value as determined in good faith by our valuation committee on a quarterly
      basis. The valuation committee, comprised of three or more non-interested board
      members, reviews and approves the valuation of our investments within the
      guidelines established by the board of directors. Fair value is generally
      defined as the amount that an investment could be sold for in an orderly
      disposition over a reasonable time. Generally, to increase objectivity in
      valuing our assets, external measures of value, such as public markets or third
      party transactions, are utilized whenever possible. Valuation is not based
      on
      long term work-out value, nor immediate liquidation value, nor incremental
      value
      for potential changes that may take place in the future.





**Recently
      issued accounting pronouncements**




In
      May
      2005, the FASB issued SFAS 154, "Accounting Changes and Error Corrections"
      which
      replaces APB Opinion No. 20 "Accounting Changes" and SFAS No. 3, "Reporting
      Accounting Changes in Interim Financial Statements-An Amendment of APB Opinion
      No. 28." SFAS 154 provides guidance on the accounting for and reporting of
      accounting changes and error corrections. It establishes retrospective
      application, or the latest practicable date, as the required method for
      reporting a change in accounting principle and the reporting of a correction
      of
      an error. SFAS 154 is effective for accounting changes and corrections of errors
      made in fiscal years beginning after December 15, 2005. Adoption of SFAS 154
      did
      not have an impact on our results of operations and financial condition.




FORWARD-LOOKING
      INFORMATION





Any
      statements contained herein related to future events are forward-looking
      statements and are made pursuant to the safe harbor provisions of the Private
      Securities Litigation Reform Act of 1995. Readers are cautioned not to place
      undue reliance on forward-looking statements. BDC Capital, Inc. undertakes
      no
      obligation to update any such statements to reflect actual events.





ITEM
      3.
      QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.





The
      Company’s investment activities contain elements of risk. The portion of the
      Company’s investment portfolio consisting of equity or equity-linked debt
      securities in private companies is subject to valuation risk. Because there
      is
      typically no public market for the equity and equity-linked debt securities
      in
      which it invests, the valuation of the equity interest in the portfolio is
      stated at “fair value” and determined in good faith by the Board of Directors on
      a quarterly basis in accordance with the Company’s investment valuation
      policy.






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            11








In
      the
      absence of a readily ascertainable market value, the estimated value of the
      Company’s portfolio may differ significantly from the value that would be placed
      on the portfolio if a ready market for the investments existed. Any changes
      in
      valuation are recorded in the Company’s consolidated statement of operations as
“Net unrealized appreciation (depreciation) on investment”.





At
      times
      a portion of the Company’s portfolio may include marketable securities traded in
      the over-the-counter market. In addition, there may be a portion of the
      Company’s portfolio for which no regular trading market exists. In order to
      realize the full value of a security, the market must trade in an orderly
      fashion or a willing purchaser must be available when a sale is to be made.
      Should an economic or other event occur that would not allow the markets to
      trade in an orderly fashion the Company may not be able to realize the fair
      value of its marketable investments or other investments in a timely
      manner.





As
      of May
      31, 2006, the Company did not have any off-balance sheet investments or hedging
      investments.





*Impact
      of Inflation*





The
      Company does not believe that its business is materially affected by inflation,
      other than the impact inflation may have on the securities markets, the
      valuations of business enterprises and the relationship of such valuation to
      underlying earnings, all of which will influence the value of the Company’s
      investments.





ITEM
      4.
      CONTROLS AND PROCEDURES





(a)
      Evaluation of Disclosure Controls and Procedures.





An
      evaluation made at the end of the period covered by this report was performed
      under the supervision and with the participation of the Company's president,
      chief executive officer ("CEO") and the chief financial officer ("CFO") of
      the
      effectiveness of the design and operation of the Company's disclosure controls
      and procedures to insure that the Company records, processes, summarizes and
      reports in a timely and effective manner the information required to be
      disclosed in reports filed with or submitted to the Securities and Exchange
      Commission. Based on that evaluation, the Company's management, including the
      CEO and CFO, concluded that the Company's disclosure controls and procedures
      were effective in timely bringing to their attention material information
      related to the Company required to be included in the Company's periodic
      Securities and Exchange Commission filings. Since the date of this evaluation,
      there have been no significant changes in the Company's internal controls or
      in
      other factors that could significantly affect those controls.





However,
      due to the limited number of Company employees engaged in the authorization,
      recording, processing and reporting of transactions, there is inherently a
      lack
      of segregation of duties. The Company periodically assesses the cost versus
      benefit of adding the resources that would remedy or mitigate this situation,
      and currently does not consider the benefits to outweigh the costs of adding
      additional staff in light of the limited number of transactions related to
      the
      Company's operations.





(b)
      Changes in Internal Controls Over Financial Reporting.





There
      have been no significant changes in internal control over financial reporting
      that occurred during the fiscal period covered by this report that have
      materially affected or are reasonably likely to materially affect the Company’s
      internal control over financial reporting.






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            12








**PART
      II**





ITEM
                1.
            LEGAL
                PROCEEDINGS





BDC
      Capital, Inc. is, from time to time, a party to litigation arising in the normal
      course of its business. BDC believes that none of these actions will have a
      material adverse effect on its financial condition or results of
      operations.





ITEM
                1A.
            RISK
                FACTORS





We
      are
      subject to various risks that may materially harm our business, financial
      condition and results of operations. You should carefully consider the risks
      and
      uncertainties described below and the other information in this filing before
      deciding to purchase our common stock. If any of these risks or uncertainties
      actually occurs, our business, financial condition or operating results could
      be
      materially harmed. In that case, the trading price of our common stock could
      decline and you could lose all or part of your investment.





ITEM
                2.
            UNREGISTERED
                SALES OF EQUITY SECURITIES AND USE OF
                PROCEEDS





None.





ITEM
                3.
            DEFAULTS
                UPON SENIOR SECURITIES





None.





ITEM
                4.
            SUBMISSION
                OF MATTERS TO A VOTE OF SECURITY
                HOLDERS





None.





ITEM
                5.
            OTHER
                INFORMATION





(a)
            All
                information required to be disclosed on a report on Form 8-K during
                the
                period ended May 31, 2006 has previously been
                reported.


(b)
            There
                have been no material changes to the procedures by which security
                holders
                may recommend nominees to the registrant’s board of
                directors.





ITEM
                6.
            EXHIBITS
                AND REPORTS ON FORM 8-K




3.1
            Articles
                of Incorporation, as amended (1)
            Previously
                Filed3.2
            Bylaws
                (1)
            Previously
                Filed31
            Certifications
                of Chief Executive Officer and Chief Financial Officer under Rule
                13a-14(a)/15d-14(a)
            Included32
            Certifications
                under Section 1350
            Included





(1)
      Incorporated by reference to exhibit filed as a part of Registration Statement
      on Form 10-SB (Commission File No. 000-27225).







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            13








SIGNATURES





In
      accordance with the requirements of the Exchange Act, the registrant caused
      this
      report to be signed on its behalf by the undersigned, thereunto duly
      authorized.





BDC
                  CAPITAL, INC.Date:July 13, 2006
              /s/
                  Richard A.
                  PomijeRichard
                  A. Pomije, CEO
















































































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